Finding a cure: incentivizing partnerships between disease advocacy groups and academic commercial researchers.

• Author: Readel, Anne M.

1. INTRODUCTION II. PARTNERSHIPS BETWEEN DISEASE ADVOCACY GROUPS AND ACADEMIC AND COMMERCIAL RESEARCHERS: THE RISE OF VENTURE PHILANTHROPY A. Disease Advocacy Group Funding for "De Novo " and "Repurposed" Drug Research B. The Shift from the Charitable Granting to Venture Philanthropy C. Benefits of the New Model: Removing Risk and Closing Funding Gaps III. LEGAL AND SOCIAL ISSUES SURROUNDING THE VENTURE PHILANTHROPY MODEL A. Structuring the Partnership B. Legal Issue: Seat on the Board of Directors C. Social Issue: Should Nonprofits be Making such Risky Investments? D. Despite these Concerns, Venture Philanthropy has Proven Its Value in Advancing Disease Research IV. INCENTIVIZING PUBLIC-PRIVATE PARTNERSHIPS FOR DISEASE RESEARCH A. Patent Law 3. A Proposal for Broader Experimental Use and Safe Harbor Exceptions for Orphan Drug Development B. Priority Review Vouchers V. WHEN A NEW DRUG IS DISCOVERED, SHOULD DISEASE ADVOCACY GROUPS CONTROL PRICING AND ACCESS? A. Orphan Drugs can be Expensive and May Not be Accessible to Everyone Affected by the Disease B. Public-private Partnership Contracts for Tiered Pricing Systems are a Good Mechanism to Control Orphan Drug Prices VI. Conclusion I. INTRODUCTION

   "The unique and mutually beneficial partnership that led to the approval of Kalydeco serves as a great model for what companies and patient groups can achieve if they collaborate on drug development." (1)

   In January 2012, the FDA approved a new breakthrough drug for cystic fibrosis: Kalydeco (ivacaftor), the first available drug that treats the cause and not just the symptoms of cystic fibrosis. (2) Cystic fibrosis is the most common fatal genetic disease among Caucasians, affecting approximately 30,000 people in the United States. (3) The average life expectancy for people with the disease is thirty-eight years. (4) While the gene that causes cystic fibrosis was discovered in 1989, (5) it has taken over two decades and a unique collaboration to find a cure. (6)

   The collaboration that gave rise to this drug discovery involved a partnership between a for-profit bioscience company, Vertex Pharmaceuticals, and a national nonprofit organization, the Cystic Fibrosis Foundation. (7) The impetus for this collaboration was simple: "the disease is prevalent enough to cause widespread pain, but too small for profit-minded bioscience companies to risk massive resources in pursuit of a cure." (8) Thus, the Foundation invested over $45 million into Vertex in 2000 for research and development of a drug for the disease. (9) This was "the largest grant of its kind by a nonprofit disease group." (10) By 2012, the Foundation had awarded Vertex over $75 million in funding (11) and has invested $260 million in drug development since the mid-1990s. (12)

   When the Cystic Fibrosis Foundation made its initial investment, such "venture philanthropy" was uncommon. (13) As the chief executive, Robert Beall, told one reporter, it was "the biggest gamble I ever made." (14) Today, however, such partnerships are becoming more common. (15) In 2008, U.S. disease foundations invested approximately $90 million into for-profit companies for drug development. (16) This was thirteen times more than was invested in 2000. (17)

   The objective of this Article is to examine the benefits and challenges of these novel partnerships and suggest ways that changes in the laws or regulations can promote these partnerships without undue harm to the goal of advancing research for cures for patients. To achieve this objective, Part I describes how partnerships between disease advocacy groups and for-profit companies have evolved and the benefits of the new venture philanthropy business model. Part II examines the legal and social issues of the venture philanthropy model. Part III then proposes various changes to laws and regulations that could help incentivize these partnerships. Finally, Part IV addresses the issue of when a new product is discovered, if and how disease advocacy groups should control drug pricing and patient access to the new drug.

2. PARTNERSHIPS BETWEEN DISEASE ADVOCACY GROUPS AND ACADEMIC AND COMMERCIAL RESEARCHERS: THE RISE OF VENTURE PHILANTHROPY

   "I've seen all the elements of drug development from NIH to industry to academia to being a patient myself ... nobody has bad intent, it's just an old and broken system that really needs to be updated." (18)

   1. Disease Advocacy Group Funding for "De Novo" and "Repurposed" Drug Research

      Voluntary health organizations, including disease advocacy groups, (19) have a "long-standing history of providing support to those suffering from disease." (20) The support provided includes offering care, educational resources, participant recruitment for clinical studies, and funding disease research to develop cures and novel therapies for particular diseases. (21) In terms of novel therapies, these groups have been concerned both with the discovery of new drugs, like Kalydeco, (22) as well as finding new uses for old drugs (known as "repurposing"). (23)

      "De novo" drug development is expensive and time consuming. (24) Prior to being marketed in the United States, each drug must undergo a detailed U.S. Food and Drug Administration (FDA) review process. (25) The drug discovery process involves the following steps: 1) basic research to identify the underlying causes or genetic mechanism; 2) screening for compounds that show activity with the disease; 3) optimization of compounds to determine whether a drug candidate might be safe and effective if taken by humans; 4) identification of the best drug candidate and filing an IND application with the FDA; 5) clinical trials; and 6) post-marketing studies to monitor product safety. (26) With this process, a new drug takes ten to fifteen years to develop and $1 billion to $4 billion to bring the drug to the market. (27) For every 5,000-10,000 compounds that enter the drug discovery process, only one will be approved. (28)

      In contrast, developing repurposed drugs can cost half that of "de novo" drugs because clinical research has already determined the toxicology, safety, dosage, and side effects of the drugs. (29) The federal government also provides incentives for companies to focus on drug repositioning, especially in the context of rare or neglected diseases. (30) For example, the FDA, through the Orphan Drug Act, provides some market exclusivity to companies that invest in repurposing drugs for the treatment for rare diseases, even if the patent term on the drug has expired. (31) The National Chemical Genome Center is also developing a library of approved drugs to in order for them to be more easily screened for additional uses. (32) These incentives have caused many biotechnology companies to increase their efforts in drug repositioning, especially when business partnerships are available to create market value in the compounds. (33)

   2. The Shift from the Charitable Granting to Venture Philanthropy

      Traditionally, disease advocacy groups provided research funding in the form of charitable grants to academic or nonprofit researchers to support basic research on a disease. (34) However, many disease advocacy groups began feeling as though the standard grant approach was not yielding sufficient results. (35) Thus, in the late 1990's, disease advocacy groups began assuming a more active role in drug development through the use of venture philanthropy. (36)

      In its most basic form, venture philanthropy employs concepts and techniques from venture capitalism and applies them to achieving philanthropic goals. (37) Venture capitalism is a mechanism for which money from various third-party sources are invested into typically high-risk areas. (38) As part of their investment strategy, venture capitalists utilize various techniques, including adopting performance measures, investing larger amounts of money in chosen organizations, partnering closely with the organizations to provide assistance and produce results, and developing an exit strategy. (39) unlike traditional charitable grants, the venture philanthropy model treats funding like an investment, with its corresponding expectations of return, operating efficiencies, and management oversight. (40)

      Drug advocacy groups are using venture philanthropy to accelerate drug discovery research for new therapies and cures for diseases. (41) under the venture philanthropy model, disease advocacy groups are funding not only basic research in academia, but also translational research and early stages of drug development. (42) This has led them to partner with private sector bioscience companies. (43) While venture philanthropy business models vary among disease advocacy groups, (44) most models have the following key characteristics: fast and flexible grant-making, long-term funding of "high risk, high reward" projects that complement NIH funding, high levels of disclosure and accountability with transparent performance metrics, interactive approach to connecting donors with beneficiaries, applying good governance and management practices, and taking an active, rather than passive facilitator role. (45) The Cystic Fibrosis Foundation is an excellent example of how one company came to adopt the venture philanthropy business model. (46)

   3. Benefits of the New Model: Removing Risk and Closing Funding Gaps

      Venture philanthropy is used to fill funding gaps that arise from drug development's economic risks. As described above, drug development entails considerable time and expense. (47) Additionally, of approved drugs, only three of every ten compounds earn a profit, irrespective of therapeutic area, and only one of ten becomes a "blockbuster" drug that earns enough profits to fund further research. (48) Thus, to help "de-risk" drug development and fill funding gaps, disease advocacy groups direct money to bioscience companies and translational research. (49) First, disease advocacy groups often fund bioscience companies. Traditionally...